The world’s second largest cocoa producer Ghana is looking to delay delivery of up to 350,000 tons of beans to next season due to poor crops, five sources told Reuters in a further worsening of the outlook for the global chocolate industry.
Chocolate makers around the world are raising prices for consumers after cocoa more than doubled in value this year alone following a third year of poor harvests in Ghana and Ivory Coast, responsible for 60% of global production.
The market had previously estimated Ghana would roll forward some 250,000 metric tons of cocoa, equivalent to about half its current crop. Cocobod, Ghana’s cocoa regulator, said the country was looking to roll over “some volumes, but not in those (350,000 ton) quantities”.
The country’s cocoa crop has been ravaged by adverse weather, bean disease and illegal gold mining, which often displaces cocoa farms.
Ghanian farmers are also smuggling more beans to neighbouring countries to sell them at higher prices than the state purchasing price, further eroding what little crop is available for delivery in Ghana.
Ghana regularly sells one year forward about 80% of its crop – which usually totals 750,000-850,000 tons.
However, its crop fell to around 670,000 tons last season and is not expected to exceed 500,000 tons this season. Traders and the industry fear it might not rebound significantly next season either.
The International Cocoa Organisation expects global cocoa production will fall 10.9% to 4.45 million tons this season.
This means processors and chocolate firms will have to draw on cocoa stocks to fully cover their needs.
Authorities in Ghana use the average of their forward sales to set the minimum price at which traders can purchases cocoa from farmers the following season.
With some 350,000 tons of forward sold beans missing from this season’s crop, Ghana is struggling with forward sales for next season, traders said. Two sources said the country has sold forward just 100,000 tons.
Sources said the 100,000 tons, like the 350,000 tons being rolled into next season, were sold at less than a half of current world cocoa prices, meaning Cocobod will struggle to increase farmer prices next season based on these sales.
Cocobod said forward sales were progressing as usual but declined to disclose volumes or prices.
Failure to raise prices will likely tempt farmers to further ramp up bean smuggling, grow other crops or sell more of their farms to gold miners, said the sources.
Source myjoyonline
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